What happens when the luck runs out?

Australia has always been thought of as the “lucky” country and it’s not difficult see why. As one of the very few western countries to weather the global financial crisis in 2008, our economic growth has been strong, stable and uninterrupted over the last 23 years. Being naturally rich in resources, foreign interest into our mining sector has always been strong, particularly from China, and we have not needed to work too hard to attract Chinese investment into mining, commodities and resources – of the $65 billion invested in Australia from China, around 95% has been into these areas. After the end of the mining boom, China shifted its focus into Australian real estate, property development and infrastructure projects, injecting much-needed foreign capital and sparking a boom in new developments and property prices.

However, just like the mining boom, will this be sustainable? It’s important to mention that no country has ever generated substantial or sustainable wealth as a mining and resources country (Brazil and Russia are examples of countries now struggling due to the fall in oil and iron ore prices). So we now need to ask, what will we do when the luck eventually runs out?

Are we truly ‘Asia-engaged’?

The Government’s Asian Century White Paper of 2012 was heralded as one of the most important documents for Australia’s future. It famously said that a “whole-of-Australia” effort is needed to deal with the social and economic transformations in Asia that will affect “almost all our economy and society”. However, it’s reasonable to say that Australian businesses and institutions haven’t entirely answered the Paper’s call to embrace the opportunities of the Asian Century.

We believe that one of the underlying reasons for this is the very low level of Asian-engagement within Australian companies particularly in their leadership teams. In 2014, the Diversity Council of Australia found that whilst the Australian labour force is 9.3% Asian born, only 4.9% make it to senior executive level. In ASX 200 companies, only 1.9% of executives have Asian heritage. These percentages would be even smaller if we just looked at those with Chinese heritage. And in a recent Australian Financial Review Article, PricewaterhouseCoopers’ CEO Luke Sayers spoke out about the “club” mentality of boardrooms in Australia that has locked out those with Asian and Chinese heritage, leaving them to languish in middle management positions. Sayers pointed that this has been seriously detrimental to our willingness and ability to engage with Asia at a corporate level.

Changing the system, however, requires much more than just diversity “quotas”. What is required are systemic changes to the way companies recruit, retain and promote staff with Asian heritage and the recognition of their relevant skills, knowledge and experiences. This undoubtedly involves greater recognition of the cultural nuances which affect approaches to leadership and management. If Australian companies want to engage with Asia, they need to lead with their Asian employees first.

It’s only the end of the beginning

One area where Australia could do much better relates to the China-Australia Free Trade Agreement (ChAFTA). After decades of negotiations, ChAFTA was seen as a “watershed moment” in the Australia China relationship. It has been considered Australia’s strongest FTA, not only because it reduces some export tariffs to 0%, but also because it delivers “best ever commitments” for market entry opportunities. One example is that Australian service providers will be able to establish wholly Australian-owned hospitals and aged care facilities in China.

There is no doubt that ChAFTA has created unprecedented opportunities for Australian businesses and Government agencies to establish positive diplomatic and high-level relationships which businesses can tap into. As much as the opportunities are there and ready to be taken, actually securing and delivering on these lucrative export and business deals requires ongoing support and guidance. There is a real danger that the excitement, support, and hype around ChAFTA will dissipate as the Government moves onto the next FTA and, from some accounts, this has already started happening. There is also a danger that other countries will begin negotiating their own FTAs to rival Australia’s and to replicate some of the concessions and provisions which Australia has been able to secure under ChAFTA. Without high-level commitment, support and encouragement at all levels, Australian businesses could miss this once in a generation opportunity.

Better use of Government time and resources

In April 2016 Prime Minister Malcolm Turnbull led the largest ever business Mission to China. Nearly 1000 delegates from 750 businesses attended the 4 day Mission, showing the high-level commitment of both Government and the corporate sector to the Australia-China relationship. 

However, one record-breaking business and trade mission to China is not sufficient to move the relationship forward. Whilst the Mission was officially deemed a success, it was a huge drain on Government staff and resources and placed a very heavy burden on their budget. And the number of deals signed (albeit important deals) were not reflective of the 1000-delegate strong Mission. Also it would seem much of the momentum has been lost as any talk about the Mission or China has seemingly disappeared from the public debate. 

A country doing a good job of leveraging trade missions and high-level government engagement is Germany. Chancellor Angela Merkel has visited China more times than any other foreign head of state and, according to reports, takes a delegation of businesses with her to China at least twice a year. It is clear Germany isn’t resting on its laurels – they’ve recognised that not only high-level but ongoing commitment at all levels is essential to being “front of mind” in China.

Creating our own luck

Luckily for us, there is very little guesswork involved about where China will be investing next – they have already told us in the 13th Five Year Plan (healthcare, education, tourism, food and environmental protection). And luckily, these represent all of our great strengths. Australians are now left with a choice. We can either sit back and wait for the next mining boom (which is unlikely) or we can proactively welcome and seek out the vast opportunities China presents to our economy, society and culture. No prizes for guessing what I think!