Australia’s key role in the ASEAN economy

China. India. ASEAN. That’s not a grouping we regularly hear but it should be. The 10 ASEAN countries – the Association of Southeast Asian Nations - make up almost 10 per cent of the world’s population and the region as a whole is experiencing an economic growth rate of around 5.1 per cent.  

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Forecasts suggest the region could become the world’s fourth largest single market, with gross domestic product of $US10 trillion by 2030 - behind only EU, US and China. That would mean we in this region should really be thinking China, ASEAN and India.

“ASEAN’s growth is likely to play out in a pattern not dissimilar to China.”

As ASEAN leaders gather in Sydney for the ASEAN-Australian Special Summit, it’s important to remember this level of economic growth - complete with rising incomes and growing populations - will mean far greater demand, particularly for food and agriculture.

When we look at recent history, ASEAN’s growth is likely to play out in a pattern not dissimilar to China, where agri consumption – to cite just one example - has soared by around 170 per cent between 1996 and 2016.

With our extensive presence in the region and drawing on our research, we see a multitude of opportunities and some key challenges:

  • For agribusinesses, bulk commodities (such as grain, beef, dairy) will be at the mercy of world prices
  • Australian production will come under challenge from large, efficient, well subsidised and well connected competitors, such as the US or the EU
  • Companies will increasingly need to look to product differentiation, firstly to add value, and to also take advantage of a changing market (whether this is consumer expectations, new markets, or new opportunities, such as the growth in export of animal feed).

But opportunities are also growing for companies to deal directly with customers, rather than through trading companies. This has come about through the availability of trading platforms, as well as through the availability of information.

The core drivers for demand across the countries of ASEAN are population and income growth – but those drivers are of different scale in different nations. For example, as Singaporeans seek more high-end steaks and cheeses, Indonesians seek fresh beef, while the citizens of a number of countries seek new varieties of noodles and bread, from Australian grain

Beef is a good case study. Demand for beef will stay strong in Indonesia. However live cattle exports will be challenged by Indian buffalo. Meanwhile there is high growth among the ASEAN middle class for “branded beef”. That is particularly the case for steak which the consumer knows is grass fed/grain fed.

In Australia we are talking about Wagyu, Angus, Hereford; regions with strong provenance such as Western Victoria or the Northern Rivers) and characteristics such as marbling score and age. Critically, richer data will mean the consumer will have many more details.

A future for agtech

As agtech – agricultural technology – develops we will likely see the use of developments such as blockchain so the consumer will have certainty on the exact origin and the supply chain. This is already being trialled by an increasing number of meat producers. Traceability is very important to the middle class ASEAN consumer

Similar advances in both consumer and producer sophistication – in an environment of global market forces – are happening in grain, dairy and horticulture.

There is a growing demand for specialised milk products – A2 milk is a great example. Australian branded cheeses and yoghurts have appeal, Infant milk formula will continue to be in great demand, though trade volumes will change, as new Chinese regulations prevent many global companies from entering China’s IMF market.

There are, of course, risks for Australian companies. ASEAN’s growth is not just attractive in the Antipodes. Even as the Black Sea region competes for grain buyers, local ASEAN nations are building local production.

These markets can be very difficult to navigate if you’re new to these countries. Often that means finding the right partner – and services such as Austrade can be vital. Finance too and an experienced partner are essential – and I’m pleased to say that’s where ANZ excels.

Companies looking to ASEAN:

  • Do your homework
  • Find a very experienced and recommended partner
  • Seek the advice of Austrade
  • Work with an experienced financial institutions
  • Take advantage of the free Trade Agreements – look into how these could put you ahead of some of your global competitors
  • Be prepared to spend a lot of time in your new market before you start trading or operating.

But I would certainly encourage you to venture north west to Southeast Asia, it will be one of the great opportunities of this century.

To read more insights into the ASEAN Special Summit click here.

Mark Whelan is Group Executive, Institutional at ANZ.

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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