Aussie Firms Found `Alarmingly' Unprepared for the Asian Century

  • Failure to secure future Asia growth may leave firms unviable
  • Aussie firms’ investment in China equivalent to that in PNG

Australian firms appear unprepared for doing business in Asia. This is according to a survey by Asialink, PwC and the Institute of Managers and Leaders. It's found very limited experience and knowledge of Asia among ASX listed company boards. Bloomberg's Michael Heath reports on 'Bloomberg Daybreak: Australia.' (Source: Bloomberg)

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Australian firms are woefully unprepared for doing business in Asia, despite all signs the region will be the global economic powerhouse of the 21st century.

Some two-thirds of board members in ASX 200 companies have no extensive experience operating in Asia, while more than half demonstrate little to no knowledge of the region’s markets, according to a survey by Asialink, PricewaterhouseCoopers and Institute of Managers and Leaders. Boards scored an “alarmingly low” 6.42 out of a possible 30 on Asia capability, with senior executive teams racking up an even worse 3.79.

“Given how much is at stake, the profoundly low levels of Asia capability on the boards and senior leadership teams of Australia’s biggest companies require immediate attention and action,” said the report. “Those that fail today to plant the seeds that will secure future growth will find it difficult to remain relevant, let alone viable, beyond 2030.”

The urgent tone is underpinned by Australia’s need for growth drivers as mining investment dwindles and a residential building boom is predicted to cool. Seven of Australia’s top 10 destinations are in Asia, representing about 60 percent of exports; yet the country’s firms invest most in the U.S., U.K. and New Zealand. Investment in China is equal to their spending in Papua New Guinea, a nation of about 7 million people north of Australia.

Watch the Video: How unprepared are Aussie firms for the Asian Century?

“Australia has arguably been asleep at the wheel when it comes to direct investment,” the report finds.

Blame Game

Leaders of public companies blamed the poor result on factors including a lack of clear information, the investor community and media skepticism. Analysts’ negative reactions to announcements about Asia strategies are compounded by an appetite for short-term returns and “negative mass media commentary” about investment in and from Asia, the report cited leaders as saying.

Such issues affect public companies disproportionately. The survey found that Australia’s 30 largest privately-owned companies showed “the vast majority demonstrate varying levels of engagement with a range of Asian markets.” By contrast, only 55 of the ASX 200 report revenue from the Asian region, it said.

This is in a nation with access to immediate expertise: Australia has a significant diaspora originating from Asia –- an estimated 1.2 million Chinese and 610,000 Indians. 

“Australian enterprises need to capture the trade and cultural links of these communities, and understand them,” the report said. “This will require effort and change: only around 4 percent of ASX 200 board members are of Asian descent, well below the 12.2 percent of Australians declaring their Asian background.”

The only real positive from the report is female senior executives: they were at least four times more likely than male counterparts to demonstrate Asia capabilities.

The report surveyed the top 200 companies by market capitalization listed on the Australian Stock Exchange on Nov. 8, 2016. A total of 1,223 board members and 489 senior executives were assessed against six capabilities:

  • Sophisticated knowledge of Asian markets;
  • Extensive experience operating in Asia;
  • Long-term trusted relationships in the region;
  • Ability to adapt behavior to Asian cultural contexts;
  • Capacity to deal with government; and
  • Useful level of language proficiency
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