The dimensions of the rewards for a successful Asian engagement are evident in the latest ANZ Opportunity Asia report which surveyed more than 1,000 Australian businesses.
The report found 50 per cent of the regional businesses said they were drawn to Asia as a result of the opportunity, compared with around 40 per cent for metropolitan businesses.Over 70 per cent of regional businesses said they’re Asian profit margins are comparable or higher to their domestic profit margins.
Nearly 60 per cent said business in Asia makes sustainable growth far more achievable and for agribusiness specifically, 70 per cent of businesses dealing in Asia were making substantially higher returns from their offshore operations.
Critical to success, according to the businesses surveyed, were good relationships in the region; the actual demand for good quality products and services; and clear lines of communication with trading partners.
One jarring element however, according to ANZ’s regional business banking head Christine Linden, was regional businesses are only half as likely as their metro counterparts to value knowledge of local market conditions and culture as a key success factor.
“And while the opportunities are significant, the survey highlights the challenges for regional businesses who actually want to secure a larger share of Asian markets: how to actually fund it,” she said.
“Over 80 per cent of regional businesses said they wouldn’t be prepared to participate in a joint venture or seek new investment from an offshore partner to grow, preferring to use personal funds. I think this is a really interesting challenge in how to size and also how to scale operations in what is a growing demand environment.”
While Linden stressed that didn’t mean foreign investment was the only option, it did indicate a need to think differently about business capital.
NOTHING HAS CHANGED
Darwin Port’s O’Connor put that challenge into perspective when asked about the new Chinese ownership of the port lease.
“Nothing’s changed, the business is the business and ships come in and ships go out,” he said. “The political noise, I think it will continue to reverberate for a while yet.”
He puts the investment in context, emphasising the lease process had full stakeholder involvement, including government agencies.
“The whole Chinese investment in Darwin has been around growth. Development of North Australia is real, it is a real thing, there’s bipartisan government opinions around this, there’s government white papers, there’s real money being invested,” O’Connor said.
“I think foreign investment and Chinese investment is a really important part of it. I take people on tours around the port regularly and we go past the railway line which is owned and operated by an American company, drive past the Shell Prelude base, the largest floating LNG facility operated by a Dutch company, past the Toll yard which owned by Japanese Post, into the Inpex facility owned by Japanese, across to the ConocoPhillips owned by the Americans.”
“There is a lot of foreign money already here and without that foreign money we wouldn’t be developing north Australia and any of this foreign investment is going to be critical to the growth in the future.”
The reality is Darwin is remote, far closer to Indonesia than Australia’s most populated south east. The population of the Northern Territory is small, it is still cheaper for international goods to be shipped around the coast by sea rather than over the land. The tropical climate can be a challenge.
To build on the opportunity of its resources and proximity, develop new businesses and offset any ‘Inpex cliff’, new investment must be encouraged. But from the time of the Larrakia, Darwin’s prosperity has been built on trade over the seas.
Andrew Cornell is managing editor at BlueNotes