Addressing Australia’s Reactive Asian Engagement Strategy

Australian needs to proactively and strategically engage with Asia, not watch passively and reactively.

I had the opportunity last week to attend a business community consultation session with the Department of Foreign Affairs and Trade and the message I delivered to them was that Australia’s foreign policy position is fundamentally wrong. Australian governments in the recent past have adopted a reactive strategic approach to international trade and engagement with Asia, and ‘we’ run the risk of missing the major opportunities that will arise through greater integration and engagement with Asia in the 21st Century. There are a number of examples that I can draw upon to emphasise this reactive policy position, and many of these policy positions are driven by domestic political imperatives, that have little use to an Australian economy that operates in a global trading and information system.

The current challenge posed to the manufacturing sector in Australia has been a long time coming, and we have had ample opportunity to address the productivity, skills and technology gap over many years. Unfortunately, the rising Australian Dollar has created an uncompetitive environment for Australian manufacturers and they will need to adapt quickly to this new environment, or disappear completely.  Politicians on all sides seem to fail to understand this new global paradigm we exist in, and so we still see the usual responses of cash handouts, to maintain the existing jobs in bulk manufacturing. There is no linkage of these grants to high technology and research and development. This must change if Australian manufacturing is to be maintained. Australia’s manufacturing future if we are to have one must be in high technology and advanced manufacturing, and we only have to look to Germany to see the template for success. If we do not engineer political policy to allow for this manufacturing transition to occur quickly many companies will cease to exist and, Australian manufacturing will come to an end.

Another example of the reactive policy thinking is through the constant debate about overseas investment in Australian resources. This is primarily a concern based on future needs, and at the moment Asian investors from China, India and other parts of Asia are placing a pricing premium on Australian resource investments.  The resources and profits generated from these investments are primarily repatriated to the home country markets in Asia, and there is rightly a concern that Australia is selling our resources for too low a price. Australian investors are choosing not to compete, and subsequently they are missing out. However, our International perspective appears to be stuck in a bubble where we see every action in isolation as if we are not operating in a global trading environment.  

Australian governments should be encouraging Australian companies to be increasing their investment exposure in Asia, to compete, and to help hedge against costs that have been affecting the viability of wholly Australian operated ventures.  An approach that seeks to encourage outward trade and investment from Australia will have multiple positive effects for the Australian economy. If we look to the manufacturing sector, there is an opportunity for these businesses to transition their operations to high end and advanced manufacturing in Australia, while offshoring the bulk and low tech component manufacturing to nearby Asian markets. This will allow increased investment in technology rich manufacturing helping to build our advanced manufacturing competitive advantage. Equally we need to remember that just as our political class and media lament the repatriation of profits back to home countries in Asia, we have this same opportunity. Australian owned investments in Asia, will allow for repatriation of profits back to Australia. A case in point would be a company such as BHP Billiton, which is utilising its vast profits collected from around the world into developing the large Olympic dam mine expansion.

So my message to the Australian Government is to take a proactive policy approach to Asia, and create an environment where Australian companies are encouraged to engage, interact and invest in Asia. Our future depends upon this investment.

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