ASIA
16 October 2014
Australia's next chapter
Australia's continued success in the Asian century will require deep reforms, new attitudes and approaches, and a new narrative, according to AFG Venture Group's Lindley Edwards.
Australia is on the cusp of a new chapter of its journey into the Asian century. But success will require deep reforms, new attitudes and approaches, and a new narrative according to Lindley Edwards, Group CEO of the Australia and South East Asia based AFG Venture Group.
The economic and political mood has certainly changed in Australia since 2012, when Australia's previous government released a white paper on the "Asian Century".
Australia's economy has entered a danger zone, according to many headlines. The prices of iron ore exports, which account for 22% of Australia's exports, have been falling. Real estate may be in a bubble, driven by Asian investors.
There are worries that Australia may suffer a backlash from a possible financial crisis in China, the country's biggest trading partner. And while there are great hopes for a revival in India's fortunes under the new leadership of Narendra Modi, there have been few signs of concrete action to date.
This was backdrop for our meeting with Lindley Edwards on a recent visit to Sydney, Australia.
Edwards pointed to the dynamism of the ASEAN countries of Southeast Asia, which have been growing at 5-6% rates, with the Philippines, Indonesia and Vietnam leading the way. Australian businesses in the service sector, like education, legal services, accounting, and outsourcing have been enjoying great success.
Education services are now Australia's third biggest export, while exports of professional services have shown very strong recent growth. For its part, the Philippines has emerged as an important location for business process outsourcing for call centres, accounting, legal, software and other services.
But Australian business needs to make greater efforts to participate in East Asia's "value chains", argued Edwards. At this point, Australia is only weakly integrated into these value chains. Australia may never develop great manufacturing brands, but it should be very able to produce more high-value added niche products and services.
Since Australia is a multicultural country with high human capital, business and government must harness the full potential of its societal diversity, according to Edwards. This means encouraging the participation of all segments of society in idea-generation and decision making. This includes Australia's different ethnic groups (some 12% of Australians are of Asian origin), indigenous Australians (about 3% of Australia's population), youth and women.
Edwards highlighted a recent report on the "bamboo ceiling" by the Diversity Council Australia. Asian Australians are well represented in entry level and mid-level jobs in Australian business, but they are significantly under-represented in leadership roles, representing an enormous waste of talent.
While there is certainly a need for security vigilance, that should not get in the way of Australia actively engaging with its ASEAN and North Asian neighbours across all aspects of society, including trade. Too much focus on security keeps us focused only on our backyard, rather than taking a bigger view over the fence and actively engaging as a good and trusted neighbour.
The key barriers locking out Asian talent in Australian organisations are: cultural bias and stereotyping; Westernised leadership models; lack of relationship capital; and a lack of understanding of the value of cultural diversity. In other words, despite Australia's veneer of multiculturalism, its business and political leadership is dominated by a predominantly male, command and control leadership style.
In this context, Edwards made a strong case for more inclusive and participative management and leadership. This means replacing traditional command and control leadership and management by more open participation, collaboration and partnerships. We need to reverse the typical Australian approach of making a business deal first, and then building a relationship.
The Asian approach of building relationships first is more conducive to longer term business development. It is also the most effective way of doing business in countries with weaker governance. Edwards remarked that indigenous Australians were often more effective at the "relational", rather than "transactional", approach to business.
Australia is now increasingly perceived as being a difficult country in which to do business, said Edwards. As a wealthy, advanced country, it is a high-cost, low-growth market. But it also has its own "country risk". The flip-flopping over the resources and carbon taxes has created uncertainty for investors, as an example.
Indeed, Australia's competitiveness has been falling since 2009, according to the World Economic Forum's most recent edition of the Global Competitiveness Report, with Australia receiving its lowest score on the innovation sub-index. Investors identified restrictive labour market regulations as a significant barrier to doing business.
The "climate change denial syndrome" of some of the current government and business leaders is short-sighted, as are plans to scale back the Renewable Energy Target, argued Edwards. Australia has enormous potential for renewable energies, especially solar and wind. But it is now extremely difficult to do renewable energy business, with adverse effects on investment, jobs and the economy.
The US also suffers from climate change denial. But its concern and policy alignment focused on energy security is driving a very successful renewable energy business, which now employs more people than the automobile industry.
Edwards cautioned that globalisation and rapid technological change is progressively widening the gap between a highly educated global elite with large earning capacity and the rest of society. Maintaining social cohesion will require more serious investments in education and training, and greater efforts to provide economic opportunity to all Australians. Giving everyone a "fair go" is not only a good thing for society, it is also good economics. Part of a fair go is encouraging and assisting people to start businesses and to grow small businesses - thereby boosting jobs and opportunities.
Every country goes through cycles. And Australia may now be coming to the end of a two-three decade period of strong growth, driven by the reforms initially launched in the 1980s and the Asia-driven resource boom.
The country now needs a new wave of reforms that could drive the services and renewable energy sectors. It also needs broad-based social innovation to harness the nation's social diversity as a source of creativity and innovation, and to ensure that social cleavages do not undermine social stability and economic vitality.
Executive Director
Asian Century Institute
The economic and political mood has certainly changed in Australia since 2012, when Australia's previous government released a white paper on the "Asian Century".
Australia's economy has entered a danger zone, according to many headlines. The prices of iron ore exports, which account for 22% of Australia's exports, have been falling. Real estate may be in a bubble, driven by Asian investors.
There are worries that Australia may suffer a backlash from a possible financial crisis in China, the country's biggest trading partner. And while there are great hopes for a revival in India's fortunes under the new leadership of Narendra Modi, there have been few signs of concrete action to date.
This was backdrop for our meeting with Lindley Edwards on a recent visit to Sydney, Australia.
Edwards pointed to the dynamism of the ASEAN countries of Southeast Asia, which have been growing at 5-6% rates, with the Philippines, Indonesia and Vietnam leading the way. Australian businesses in the service sector, like education, legal services, accounting, and outsourcing have been enjoying great success.
Education services are now Australia's third biggest export, while exports of professional services have shown very strong recent growth. For its part, the Philippines has emerged as an important location for business process outsourcing for call centres, accounting, legal, software and other services.
But Australian business needs to make greater efforts to participate in East Asia's "value chains", argued Edwards. At this point, Australia is only weakly integrated into these value chains. Australia may never develop great manufacturing brands, but it should be very able to produce more high-value added niche products and services.
Since Australia is a multicultural country with high human capital, business and government must harness the full potential of its societal diversity, according to Edwards. This means encouraging the participation of all segments of society in idea-generation and decision making. This includes Australia's different ethnic groups (some 12% of Australians are of Asian origin), indigenous Australians (about 3% of Australia's population), youth and women.
Edwards highlighted a recent report on the "bamboo ceiling" by the Diversity Council Australia. Asian Australians are well represented in entry level and mid-level jobs in Australian business, but they are significantly under-represented in leadership roles, representing an enormous waste of talent.
While there is certainly a need for security vigilance, that should not get in the way of Australia actively engaging with its ASEAN and North Asian neighbours across all aspects of society, including trade. Too much focus on security keeps us focused only on our backyard, rather than taking a bigger view over the fence and actively engaging as a good and trusted neighbour.
The key barriers locking out Asian talent in Australian organisations are: cultural bias and stereotyping; Westernised leadership models; lack of relationship capital; and a lack of understanding of the value of cultural diversity. In other words, despite Australia's veneer of multiculturalism, its business and political leadership is dominated by a predominantly male, command and control leadership style.
In this context, Edwards made a strong case for more inclusive and participative management and leadership. This means replacing traditional command and control leadership and management by more open participation, collaboration and partnerships. We need to reverse the typical Australian approach of making a business deal first, and then building a relationship.
The Asian approach of building relationships first is more conducive to longer term business development. It is also the most effective way of doing business in countries with weaker governance. Edwards remarked that indigenous Australians were often more effective at the "relational", rather than "transactional", approach to business.
Australia is now increasingly perceived as being a difficult country in which to do business, said Edwards. As a wealthy, advanced country, it is a high-cost, low-growth market. But it also has its own "country risk". The flip-flopping over the resources and carbon taxes has created uncertainty for investors, as an example.
Indeed, Australia's competitiveness has been falling since 2009, according to the World Economic Forum's most recent edition of the Global Competitiveness Report, with Australia receiving its lowest score on the innovation sub-index. Investors identified restrictive labour market regulations as a significant barrier to doing business.
The "climate change denial syndrome" of some of the current government and business leaders is short-sighted, as are plans to scale back the Renewable Energy Target, argued Edwards. Australia has enormous potential for renewable energies, especially solar and wind. But it is now extremely difficult to do renewable energy business, with adverse effects on investment, jobs and the economy.
The US also suffers from climate change denial. But its concern and policy alignment focused on energy security is driving a very successful renewable energy business, which now employs more people than the automobile industry.
Edwards cautioned that globalisation and rapid technological change is progressively widening the gap between a highly educated global elite with large earning capacity and the rest of society. Maintaining social cohesion will require more serious investments in education and training, and greater efforts to provide economic opportunity to all Australians. Giving everyone a "fair go" is not only a good thing for society, it is also good economics. Part of a fair go is encouraging and assisting people to start businesses and to grow small businesses - thereby boosting jobs and opportunities.
Every country goes through cycles. And Australia may now be coming to the end of a two-three decade period of strong growth, driven by the reforms initially launched in the 1980s and the Asia-driven resource boom.
The country now needs a new wave of reforms that could drive the services and renewable energy sectors. It also needs broad-based social innovation to harness the nation's social diversity as a source of creativity and innovation, and to ensure that social cleavages do not undermine social stability and economic vitality.
Author
John WestExecutive Director
Asian Century Institute