Internationally-active businesses are Asia-capable

21 Dec 2017

Tags

  • Divya Skene
  • AIBS 2017

The debate on Australia’s Asia capability doesn't seem to have moved very far, even when other areas of Australia's engagement with Asia have transformed significantly.

There’s a long-running debate about the level of Asia capability among Australian businesses. Over the time this debate has been running, there have been major changes in other parts of the Asian economic environment. These include but are not limited to:

  • Transformation in economic development models - the flying geese model of Asian development is now rarely mentioned and even commentary on export led development has become more subdued, with observers of large markets China and India now focussed on consumption-led growth.
  • The New Colombo Plan, greater air connections and family ties mean the experience of living in different corners of Asia is not uncommon for young Australians.
  • Old policies with once-ambitious titles such as 'Supermarket to Asia' have been fulfilled - with an e-commerce enabled Asia now valuing Australian brands that retail in our supermarkets.

Yet despite all these changes, the debate on Asia capability still seems to have the same headline targets, calling for

  • more Australians with Asian language skills (with much of the commentary now focussed on people without Asian heritage picking up Asian languages); and
  • better engagement by Australian companies, of senior managers and board members with experience operating (living, working or studying) in Asia.

A lack of Asia capability is still widely considered to be holding back Australian business.

To add a firm-level perspective to this topic, this post looks at AIBS 2017 survey findings to gauge the level of Asia capability of our sample of internationally-active businesses.

The AIBS survey asked respondents to name their top revenue markets.

The top revenue markets listed by firms are:

Region/MarketAsia*East AsiaASEANChinaUnited StatesEuropean UnionUnited KingdomSouth Asia
Share of respondent firms nominating the market61%57%29%23%22%19%10%7%

* Asia includes East plus South, excludes West and Central Asia. Firms may only be selling to a single market, but can choose up to two top revenue markets.

For AIBS respondents, China and the United States are both top revenue markets, each reported as important by over one fifth of all respondents. (For firms, the ASEAN region tops both these revenue sources, with 29 per cent of firms earning their highest revenues there while the EU region (including UK) is important to around one fifth of firms.)

However, roughly three times as many firms (61 per cent) have nominated Asia as an important market than either the US or EU, and East Asia in particular is reported as a top revenue source for a majority of AIBS respondents (57per cent).

If earning high revenue is one metric of Asia capability for business, then our survey shows the internationally active business community - at a firm level – already exhibits this capability.

Revenue concentration in key markets is strong - over 40 per cent of firms that have nominated China and the US as a top revenue market are earning over 50 per cent of their total international revenue in these markets. This compares to 23 per cent of firms selling to Singapore earning over half their international revenue from that market, and 21 per cent selling to the UK earning over half their international revenue from that market.

As shown in an earlier blog, ASEAN is also the leading market for our sample of firms selling either goods or services into Australia's FTA partner markets.

The data suggests the Asia-capability debate is not only important to many internationally-active firms, but that a large share of that business community is handling those challenges daily – and evolving in capability.