Australian Business Slow to Focus on Asia

IMAGINE a Southeast Asia where endemic poverty has been almost wiped out and millions of people are clamoring to buy VCRs, processed foods, new homes, and designer clothes.

That's the vision conveyed by a comprehensive new report by the Australian Department of Foreign Affairs and Trade, "Australia's Business Challenge; Southeast Asia in the 1990s."

The area is booming, the report says. The six countries of the Association of Southeast Asian Nations - Malaysia, Indonesia, Thailand, Singapore, Phillipines, and Brunei - are expected to import A$643 billion to A$715 billion (US$446 billion to US$495 billion) worth of goods and services by the end of the decade. That is double the present level in real terms.

The ranks of the middle class in the area will swell from around 6 million now to more than 40 million by early next century.

The challenge to Australia, says the report, is to ride the wave. An increase in Australia's share of the six nation's imports from 3 to 4 percent would boost exports to $27 billion by the year 2000.

But is Australia, with its advantages of being the nearest large English-speaking country in the same time zone, taking advantage of this gold mine?

Australia's traditional orientation toward Britain and the United States has been inexorably shifting toward Asia. Two-thirds of its exports go to Japan and Asia, only 11 percent to the US. And 7 out of the top 10 markets for Australian manufactured goods are in Asia.

Prime Minister Paul Keating has made it a personal campaign to get Australians to start thinking of the country as part of Asia, rather than an appendage of Britain. There are frequent trade missions to the region as well as numerous conferences on trade.

EXPORTS to Southeast Asia grew an average of 14 percent, compared to 10 percent for total Australian exports, according to the Department of Foreign Affairs and Trade.

Yet the market share is not what it could be, according to the report. In 1991, Southeast Asia accounted for just over 12 percent of Australia's exports and around 8 percent of imports. At the same time, Australia accounted for under 3 percent of South-east Asia's imports and 2 percent of its exports.

"We don't have the markets there you'd expect us to have," says John Macleod, executive director of the Council for International Business Affairs, a private, nonprofit company in Melbourne. "Given that Southeast Asia is our near neighbor, you'd think we'd have a really good share, not 2 percent."

The report castigates the business community for having "bypassed" the wave of growth in the early 1980s.

Ian Salmon, managing director of the AMP Society, Australia's largest insurance company, told the recent Asia-Pacific Business and Investment Congress in Sydney, that he feels the recent encouragement from top levels of government is a good start, but that businesses need to take that further. "At the enterprise level ... the uncertainties and the complex nature of Asia are perceived as too overwhelming," Mr. Salmon says.

P. H. Barratt, executive director of the Business Council of Australia, says, "People go to where it's easier to do business."

Even though the political situations and economic climate have changed, investment is still down. Mr. Barratt does not entirely agree with the report's assessment of Australia as underinvesting in the region. Australia is a capital-importing country, he says, and companies need a good reason to invest overseas.

Most purely Australia-owned companies are in nontradeable goods - goods too heavy to export well, such as beer, tiles and bricks, Mr. Macleod says. Foreign companies making those goods do not export, but they do invest in other countries. "The question for Australia is why haven't those companies gone in yet?"

Hseih Fu Hua, managing director of Morgan Grenfell Asia Holdings, told the congress that until Australia started investing more in the region, it would be regarded as an outsider.

"The wave is there," says Russell Fynmore, retired executive general manager of BHP, and co-author of the report overview. "If we don't catch it, somebody else will."