Australian policy also needs to wrestle with the strategic questions raised by globalisation. For instance, is the current trade pattern of commodities to Asia and investments to the “Anglospehere” likely to be healthy or even sustainable over the longer term?
Australian companies’ Asian investment is only very slowly reflecting the increasing importance of Asia as an export destination. Stronger people-to-people links are stalled. Our biggest miners are increasingly reliant on China, but their staff levels within that country remain tiny. Are we satisfied to let this continue? Or is it necessary to offset these market trends with a greater all round engagement that will help the bilateral relationship weather the travails of commodity price fluctuation?
Moreover, the commodity boom itself is driven by a globalisation process that has shipped a huge swathe of global production to the developing world, leaving many developed economies dependent upon service industries, particularly finance, for growth.
The finance sector is an area of comparative advantage that could be globalised. The Prime Minister recently announced an agreement with the US Securities and Exchange Commission to achieve mutual recognition for the two nations’ securities regimes by the end of this year. The intent is to remove barriers that make it difficult for Australian companies to raise equity capital in America.
This kind of strategic effort has been lacking in other industry sectors. The impact will not just be easier access to US capital for Australian companies, it will help make Australia a useful gateway for Asian companies looking to gain access, reflecting the Rudd government’s stated intention to make Australia a regional finance hub.
The capital markets, and legal and education systems of the developing world remain immature and over the long term represent an enormous opportunity for Australian investment and the application of Australian skills. These are tough markets with much local knowledge and persistence required, based on people-to-people links. But it will be worth the effort. The demand for education will be huge as wealth grows, increasing societal sophistication will drive demand for legal services and the need for finance skill will be strong as emerging economies set out to deepen their capital markets and move beyond a heavy dependence on banking.
The EFIC GRI also underlined that the single largest barrier to international expansion is the lack of local business and market knowledge. Sensitivity to cultural differences and other countries’ ways of doing things was also a prominent barrier. If Australia is to take advantage of the developing economies on its doorstep, it is vital that Australian policy address the waning Asian studies and language capacity of the nation (including Middle Eastern studies). This is not a political question; it is a matter of strategic priority.
© 2008 The Diplomat Analytic Unit