What ASEAN offers – Australia’s new trade focus

ASEAN member States now rank alongside China as the world’s leading destination for FDI as countries like Japan and South Korea hunt for growth. A new study identifies ASEAN as Australia’s third sphere of
future prosperity, after China and India . . .

AS DAVID LANDERS sees it, ASEAN is coming of age as a high-potential market for Australia.
Landers, General Manager, East Asian Growth Markets, for Austrade, points to a new report published jointly by Austrade and Australia’s Department of Foreign Affairs which emphasises the growing importance of 620 million people living directly to Australia’s north in the ASEAN markets.
He says Austrade’s decision to focus on ASEAN began long before anyone could forecast the slower growth being seen in China today. “Strategically, there was a recognition that there are three dominant spheres of future prosperity for Australian business out there — one is China, the second is India, the third is ASEAN,” Landers told ATI.
“My assertion is that if you looked at ASEAN five years ago you would have said this is just a collection of fragmented subscale markets, so it was very difficult to even think of ASEAN in one framework.
“Even today, we are not looking at one homogenous market either — that is a fallacy —– but what we do see is one large, increasingly connected market.”
 Landers says the Austrade/DFAT report, Why ASEAN and Why Now?, identifies six
major drivers of growth in the ASEAN region. These include the more obvious, like formation of regional architecture (the ASEAN Economic Community (AEC)), but there are also some
less obvious drivers, like the growth of regional value chains and increased FDI.
“ASEAN is now equal with China as a major recipient of FDI,” he says. “And when you look at the six major drivers of growth acting in concert, you begin to appreciate that we are now at a truly catalytic point in the development and growth of ASEAN. Japan and Korea are hunting for growth, and nowhere is that growth bigger than in ASEAN, where there is a young, fast-growing population.
“The services sector in ASEAN – Singapore aside – as a percentage of GDP is out of line with global norms. That has always been the case, but there is no reason by ASEAN should stay that way. Services will increase, and that plays to Australia’s strength.”
 Then, he says, there is infrastructure, with ASEAN member States needing investment in infrastructure of US$600 billion between 2010 and 2020. China’s Silk Road will also connect into Southeast Asia. “So there will be transport connectivity, the money is there, and the young population is skilling up.”
As Landers sees it, there are six primary ways in which Australia is deepening its trade relationship with ASEAN.
Education. “We already have a big intake for higher education and vocational training, growing at a double-digit rate in some countries. For example, RMIT would be one of the top universities in Vietnam today.”
Resources and energy. “Especially in
Vietnam, Indonesia and the Philippines, we are constantly offering to work in partnership to develop resources in a safe and sustainable way. Our mining services companies — and these are generally SMEs – are highly respected and cost-effective.”
Infrastructure. “Especially at the high-
value end around transport, airports, design automation, maintenance of ports and freight haul, we have a lot of capability.”
Advanced manufacturing. “We have
actually made some very good inroads in automotive goods capability in places like Thailand, but also in the automotive aftermarket in personalising vehicles. After-market is about 30 per cent of the Australian market.
“Then there is aerospace.”
Agriculture. “We are not just a bulk supplier. We are looking at how Australian beef, dairy and  horticulture can be grown in Asia. That is a bread-and-butter market for us. Food security
is also in there. It is very important to balance the premium Australian message with food
sustainability.”
Grain supply. “Not perceived as highly
value-added, but important for this country.”
Says Landers: “It is all about playing to our strengths. What I have talked about here is the demand side. There is also the supply side. Australia’s complementarity with ASEAN in a trade sense is as high as with any country or region in the world.”
Austrade will make a major push into the Indonesian market in November with at least 200 Australian companies to participate in Indonesia-Australia Business Week.
Austrade now has 21 market teams working across ASEAN, China and wider Asia to identify specific opportunities and to create awareness of these opportunities in Australia. This puts nearly 200 people, many of them locals, on the ground.
Landers, who has been in his current role now for two-and-a-half years, says that, in that time, he has seen a shift in the attitude of smaller-end exporters to Asia. “There is more awareness that something is happening in the market,” he told ATI.
“We also have to think of it in terms of
demand sectors. Think of a country and think of the markets there. ASEAN is not a homogenous market, but there are market clusters of
demand. In Thailand, for example, there is a demand centre 50 km around Bangkok, another demand centre 50 km around Chiangmai.
“In Vietnam, you are seeing core investment out of Japan and Korea,and this has had a big multiplier effect on the economy. Vietnam is
really lifting off quite rapidly now, compared to where it was, say, 12 months ago.”

A study in diversity . . .

THE Austrade/DFAT report, Why ASEAN and why now?, says around 80 million ASEAN households are part of the rising middle class, defined by McKinsey as a ‘consuming class’ – those with a household income of more than US$7,500 in 2005 purchasing power terms.
“This number is expected to double to 160 million households by 2030,” the study says. “As the tastes of ASEAN urbanites change, there will be increased opportunities for Australian exporters in the food and beverage, agribusiness, healthcare and education sectors.
“ASEAN’s combined population of around 620 million is larger than that of either the EU or North America. Just over one-third of ASEAN’s people live in cities, but they constitute more than two-thirds of the region’s GDP.
“By 2030, an additional 90 million people are expected to live in urban areas, which could add more than US$500 billion to ASEAN GDP and substantially boost productivity. Collectively, ASEAN’s labour force is the third-largest in the world, behind only China and India.”
Indonesia, Malaysia, the Philippines and
Vietnam are predicted to record double-digit labour force growth over the next decade or
so, and ASEAN’s working age population is
projected to reach 500 million in 2020.
This will produce significant opportunities for Australian education and training providers that can meet this increased demand.”
As the report sees it, over the next decade six major growth drivers will increase regional
opportunities for Australian businesses. These are —
n Development of the region’s economic architecture — the move towards an integrated ASEAN economy (the ASEAN Economic Community (AEC)), complemented by regional free trade agreements;
n Growth of the services sector;
n Further development of Regional Value Chains (RVCs) driven by regional business leaders;
n ASEAN’s status as an emerging FDI destination;
n Infrastructure development to improve connectivity; and
n  Productivity gains through education and training.
The study says ASEAN’s combined GDP rose threefold from 2000 to 2014 to US$2.5 trillion, accounting for 3.2 per cent of the world economy.
“ASEAN’s diversity presents a range of opportunities for Australian businesses – from Singapore’s sophisticated services-based economic to ‘frontier’ markets in Laos, Burma and Cambodia, the rapidly-modernising economy of Vietnam, and strategically-significant consumer centres such as Indonesia,” it says.
“As a region, ASEAN accounts for close to seven per cent of world trade. Intra-ASEAN trade accounts for 24 per cent of ASEAN’s
total trade – a percentage that is larger than
ASEAN’s trade relationship with China, Japan or the United States.
“Collectively, ASEAN is Australia’s second-largest trading partner, accounting for more than 15 per cent of Australia’s total trade in 2014. Australia is ASEAN’s eighth-largest trading partner (excluding intra-ASEAN trade).
“The region accounts for close to a quarter of Australia’s total food exports, including grains, live animals, dairy and seafood.
“Education-related travel services account for 37 per cent of Australian services exports in the region and more than 100,000 students from ASEAN countries have enrolled to study in Australia in 2015.”
The study reports that, collectively, the
ASEAN member States rank alongside China as the world’s leading destination for FDI.
China and ASEAN each attract an eight per cent share.
More than 65 per cent of ASEAN’s population is under the age of 35.