Ready to service the Asian economic boom
“Amid the shanty towns and flashy mansions of India's mega-city Mumbai, there's an unexpected Australian export: serviced offices for hire.”
Amid the shanty towns and flashy mansions of India's mega-city Mumbai, there's an unexpected Australian export: serviced offices for hire.
Located in a swank district that's home to a cast of Bollywood stars, they give businesses the use of a premium address with impressive views and a receptionist, in one of the world's most expensive commercial property markets.
It's run by the Indian franchise of a Sydney firm, Servcorp, which provides offices, meeting rooms and other business amenities in prime city locations across the globe.
Big ships laden with iron ore fits the stereotype of Australia's exports to Asia much better than serviced offices. But according to Australia's guardians at the Commonwealth Treasury, there is growing potential to sell things other than rocks and crops to the region.
The historic event of the world's two most populated nations - China and India - industrialising and urbanising almost simultaneously holds economic possibilities unimagined a decade ago.
Australia's foodstuffs, tourism destinations, educational institutions, financial services, business services, professional services and niche manufactures are set for a surge in demand.
"The mining boom is just the first manifestation for Australia of this change in the world's economic geography," this year's budget papers said.
Asia's economic re-emergence is creating a consumer market of unprecedented scale and diversity. India's appetite for mobile phones illustrates the pace of change. A decade ago, the country had fewer than 10 million mobile subscribers. Now there are more than 850 million.
The nascent consumer class in China and India is spending big on consumer durables, like mobiles, and housing. This has helped fuel the unprecedented demand for Australia's mineral resources.
But as their incomes rise, Asia's consumers will spend more on services and some goods that Australia is good at producing.
"The kind of services that Asians will want [are] exactly the same as the ones Australia's middle class want," Saul Eslake, an economist with the Grattan Institute, said.
"It will be things like health, education, professional services, recreation, communication, art, culture and travel."
Australia's proximity to Asia, and the capabilities of its workforce, has given it a head start to capitalise on the opportunities that will flow from this transformation. Our increasingly knowledge-based economy - where services make up about three-quarters of gross domestic product - is well-equipped to respond.
Big corporations have dominated resources exports to Asia but economists say the next phase in Australia's economic engagement in the region could be led by smaller, innovative exporters like the Dural laser and lighting entertainment firm, Laservision. It has offices in Hong Kong and Singapore and generates 97 per cent of its revenue in the greater Asian region.
"Higher disposable incomes will mean luxury entertainment items will be in a higher demand, therefore increasing the demand for Laservision services and products," Shannon Brooks, the director of projects and marketing, said.
But selling services in Asian markets is very different from exporting minerals.
Taine Moufarrige, the executive director of Servcorp, said his firm does extensive research in locations where they are considering setting up serviced offices. They establish local contacts, investigate bureaucratic processes and study local business etiquette.
"We've learnt that we really have to understand the culture and business environment," Moufarrige said. "There is such a massive opportunity for Australia in Asia but I think it's going to be a really long process."
Australia's situation has parallels to the Scandinavian nations when Europe became a trading bloc. They were high-wage economies on the periphery of a huge new economic powerhouse. The Scandinavian economies seized the opportunity and successfully targeted niche markets for their goods and services in Europe. One legacy is a clutch of Scandinavian global brands including Nokia, Volvo and Ikea.
But is Australia ready for a deeper economic engagement with Asia? It's likely to be a much tougher challenge than the Scandinavians had, given the cultural and language differences. The spate of attacks on Indian students in Australia in 2009 and 2010 underscored how exporting services comes with cultural hazards.
The crisis strained relations between Delhi and Canberra and damaged the overseas education industry. But it also exposed an ignorance of Indian society and culture among Australians, including some top public officials.
Australian businesses have been dealing with Asian customers for over a century but they still have a lot to learn.
Heather Ridout, chief executive of the Australian Industry Group, said there is still a "real cultural gap" between Australia and its northern neighbours. She said governments must do more to promote understanding of Asian societies and languages, especially in schools.
"The teaching of Asian language skills in our schools is pathetic," she said.
A recent survey by the Australia Industry Group and Asialink found that 74 per cent of businesses not yet operating in Asia were interested in expanding into the area. But it also exposed big gaps in their experience and skills to do this.
The Commonwealth Treasury warns repeatedly that the opportunities presented by the economic re-emergence of Asia will not fall into our lap.
A change in the mindset of businesses, and the broader community, will be needed if Australia is to make the most of the Asian century.
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Author - James Green
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