But there’s a lot of preparation to be done before 2018, and both the government and Australia’s business community can do a lot to engage effectively with the region in the intervening period.
Australia’s investment focus has for some time been caught up with China. It’s easy to understand why – the two mega-economies are within our economic sphere of influence, represent significant opportunities to create wealth and employment, and feature large, entrepreneurial diaspora communities that are willing to do engage in cross-border business.
It’s excellent that the Australian government has been pursuing Chinese investment and trade partnerships so heavily, but Australian governments and business have been at risk of neglecting another critical source of foreign investment and destination for trade links: the ASEAN economies of Southeast Asia, namely Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Australia does have a fairly long history of engagement with ASEAN. Back in 2009, Australia and New Zealand signed a free trade agreement with the ASEAN region, with the aim of creating a more transparent and open market across the region.
That free trade agreement was, at the time, seen as a priority, coming as it did before the China, Japan and South Korea agreements.
Since then, the ASEAN region has dropped off the radar of both the Australian government and, in many cases, Australian business. The Asian Century White Paper undertaken by the Gillard Government prioritised China and India as key strategic trade partners and made some mention of the ASEAN nations, but since then the general vibe is that ASEAN has been deprioritised.
The potential negative consequences are enormous. Around 625 million people live in the region, it has a combined total GDP of around US$2.5 trillion, and in 2014 its total GDP growth was at 4.7%.
That’s a lot of untapped potential, and Australian business owners run the risk of missing out on an important cohort of trading partners, investors, and potential markets if they don’t engage with ASEAN nations.
There’s evidence that ASEAN nations do want to engage with Australian business, especially in the Australian property sector, which is still seen as a solid investment. Singaporean and Malaysian developers are behind many of the key inner-city urban developments taking place in Melbourne and Sydney.
It’s not just the property and construction sector that would benefit from greater ASEAN engagement. Professional services, agriculture, retail, hospitality and tourism are sectors that are ripe to take advantage of rising incomes, wealth and desire for investment among the ASEAN middle classes.
ASEAN nations are keen to invest in Australia, and they provide opportunities for Australian businesses to expand into international markets on our doorstep, but Australian businesses are inherently conservative when it comes to risk, and new cross-border partnerships can be a difficult path to navigate.
Advisors with experience in the region can assist businesses with transitioning into mutually beneficial commercial arrangements and partnerships, but government also needs to prioritise ASEAN engagement in order to send a message to Australian business that the region is a key priority.
Under the ASEAN-Australia-New Zealand Free Trade Agreement, final tariff elimination of all tariff lines is slated to be achieved by 2020. Conclusion of this agreement and stronger trade links within the region should be prioritised as key trade and foreign affairs platforms for the Turnbull government into 2017.
The ASEAN economies are growing, and getting wealthier and more connected to the global economy every year. In a time when continued volatility in China may prompt businesses to better diversify their exposure across the region, the consequence of not engaging with ASEAN now is that we could miss the chance to create and grow positive trade relationships at all.
The Turnbull government should keep this in mind as it seeks to re-engage within the region in the lead-up to its proposed 2018 summit.
This article was originally published in the Spring 2016 issue of The Asian Executive.