Business without borders: Australia’s export growth potential
In today’s globally interconnected economic, social and commercial environment, it’s never been a better time to consider unlocking the internationalisation potential of your business. According to the European Commission’s Business Innovation Observatory, “internationalisation provides opportunities not only for revenue growth but also for the exchange of knowledge and the enhancement of capabilities.” The potential to export Australian goods, knowledge and services across the world is now more diverse and lucrative than ever, especially in many emerging and previously unsung international business destinations.
Challenging Australian preconceptions
The way in which contemporary Australian businesses have traditionally seen their place in their world has often been limited by geographical proximity. Whereas Asia slowly emerged into Australia’s external economic focus in the 1990s, the two decades of hyper-globalisation since then have rapidly elevated the trajectory of commercial opportunities worldwide. Now is the time for internationally-minded Australian companies to consolidate their current trading relationships and extend them into neighbouring countries, which often share similar market needs, cultural heritage and infrastructural or logistical linkages.
Whilst recent free trade agreements with Japan, China and Korea, as well as the Trans-Pacific Partnership (TPP) and other transnational negotiations have bolstered our ideas of how Australia fits into the Asia-Pacific region, it’s also important to contemplate the growth being experienced in other parts of the world; and how inroads into new markets and connections with foreign suppliers, service providers and supply chains can assist in expanding your company’s global reach.
The changing nature of Australia’s economy should also be prompting local small and medium-sized enterprises (SMEs) towards exporting their value-added goods and services to the world. Despite the Australian services sector accounting for 70% of real GDP, and “employing four out of five Australians,” there’s still tremendous room for it to grow internationally. According to the Export Council of Australia, Australian services exports in 2014 were valued at AUD$57 billion, but the federal government estimates this represented just 18.4% of total Australian exports that year.
As a world-class provider of goods and services, particularly in food and agriculture, education, tourism, infrastructure, natural resources, construction, water management, ICT and healthcare, Australian companies should be aiming to make the most of this hard-earned reputation and the low Australian dollar. Our country’s major competitive advantage in these areas must not be wasted.
In short, Australian companies must realign their commercial compasses and consider the bigger picture. With sizeable changes ahead in worldwide consumer demand and enduser locations of goods and services exports, EY and Oxford Economics have forecast that by 2020, global trade in goods will be valued at $USD35 trillion, up from $USD14 trillion in 2010; and global services trade will double to around USD$6 trillion. This enormous growth will be primarily driven by new trade flows into Asia, the Middle East, South America and Africa.
To ensure their future prosperity, Australian companies must broaden their scope on both a corporate and cultural level, bypass their prior assumptions and treat our differences and unfamiliarity with these regions as an opportunity and not an insurmountable challenge. With measured risk comes reward.
Not only are the dynamics of international trading relationships changing, but several factors are also playing a major role in how we perceive a world of business without borders, namely:
• Technological and digital advancements;
• Massive investment in global logistical capacity;
• More flexible and mobile international workforces;
• Access to international finance;
• Trade liberalisation policies; and
• Cross-border data flows.
Workplace digitisation and the open-knowledge economy have also been pivotal in disrupting antiquated business models and work practices in recent years. According to a report by Hunton & Williams LLP, “the seamless transfer of information is as critically important as it is inexorably linked to the growth and success of the global economy.” Combined with emerging market shifts towards economic and trading partner diversification, these key drivers are all helping to create commercial opportunities on an unprecedented scale. As such, there are significant market gaps for Australian goods and services to fill, from Mexico to Indonesia to Oman and Brazil.
According to the Export Council of Australia‘s Head Research Manager, Niels Strazdins:
New partnerships and seamless connectivity
SMEs across the globe are now targeting fresh international partnerships to improve and fast-track their offerings and increase market share. Furthermore, consumer preferences and spending are changing as a result of digitally connected and internationally aware populations. In the past decade alone, hyper-connectivity and the rapid expansion of expatriate workforces has brought new industries and consumption trends to the fore, from Shanghai and Dubai to Almaty, Jakarta and Baku.
In comparison to the stagnation of Western growth since the GFC, strong economic performance in emerging markets means new export opportunities are increasingly being leveraged. Additionally, the rising influence and affluence of industrialised and certain developing countries is creating possibilities that were unfathomable just five years ago. For instance, the imminent opening of frontier market access into Iran will present strong long-term prospects for Australia’s agribusiness, tourism, education, healthcare, mining, manufacturing, water and renewable energy, ICT and professional services sectors.
Aviation code-sharing agreements and substantial supply chain improvements worldwide have also furthered Australia’s export growth potential. The escalation of logistical investment in Asia and the Middle East in facilitating trade and merchandise re-exports has been particularly crucial in reaching new markets. Dubai is now the prime re-export hub for the Middle East and North Africa (MENA) region, Sub-Saharan Africa and Sub-continental Asia; and can even provide a gateway into Europe. For example, Australia’s reach into the MENA region has increased dramatically since the advent of the Qantas-Emirates and Virgin Australia-Etihad partnerships, with over 150 direct flights to and from the region each week.
In 2016, Australian enterprises and businesspeople should be asking questions about future growth strategies and the internationalisation capacity of their operations. Investigating new potential export markets to supplement domestic revenue and evaluating your company’s internal readiness to enter them must be critical considerations for the ongoing prosperity of all Australian industries.
Regardless of whether you are bringing tangible products to market or rendering professional services, you should be actively pursuing opportunities beyond Australia’s borders this year.