Robb tells business to gets its act together

Wednesday, 05 April 2017

Robb tells business to gets its act together
Photo: Fiona Goodall | Source: AFR | Former trade minister Andrew Robb says Australian businesses are not taking nearly enough advantage of the free trade agreements.

Original article by Jennifer Hewitt in the Australian Financial Review:

Andrew Robb is clearly not content to have his later career defined as the Federal minister who negotiated three momentous trade deals with China, Korea and Japan.

He wants to see those trade deals deliver on their potential. And right now, he's sounding rather impatient at how long it is taking most Australian businesses to take advantage of those deals – particularly in the services sector.

He blames a sense of "absolute complacency" for Australia happily ignoring the benefits of greater trade and the export opportunities that exist in a region where the growth of the middle class is exponential.

Nor does he regard this merely as a matter of size - of small and medium sized businesses not feeling they have the ability or the need to risk a much larger market outside Australia.

Instead, he is extremely critical of the larger Australian businesses that choose to focus their sizeable investments and expansion domestically or on traditional US and European markets.

Never a bloke to hide his frustration, Robb says he "despairs" of what is happening in China – or rather not happening – in terms of Australian business.

Australian companies should be learning to partner with local Asian companies for mutual benefit, particularly in China given the complexity of the country's legal and registrations systems, he says. Yet mostly, they are not.

This is hardly the sort of typically happy talk from the Coalition Government about big increases in trade in key commodities, especially in agriculture and exports like beef and wine, as a result of the agreements .

Robb's contrary view reflects the sort of blunt speaking that tends to characterise those experiencing what is happening on the ground rather than in theory.

"I have just come back from my tenth trip since July last year to China and there's my increasing awareness of how little trade is going on between our big businesses," Robb says. "Some of our very big companies with name brands in Australia for 50, 60, 100 years have not got one item in China.

"It beggars belief that there is hardly any Australian product on the shelves of one million supermarkets in China.

"OK we sell a lot of product, a lot of it at the margin. That is all good. All this e-commerce and the rest is fantastic in getting some of our brands up. But in terms of the big licks, the big companies, there is this reluctance. They either think they have got to go in and take them on – or not do anything at all.

"You have got to go in and take what you do best and partner and form a shared business structure that will make the best of it all."

Robb was speaking at the launch of an essay by Andrew Bragg from the Menzies Research Centre. Appropriately, the essay is called "Fit For Service: Meeting the demand of the Asian Middle Class."

It argues that Australia has to move quickly to take advantage of an Asian middle class that will number three billion people by 2030. The author says that while Australia does have strong institutional capacity in areas of traditional strength like mining and agriculture, this is not matched in the services sector.

But any government support still requires considerable imagination, research and willingness to take risks by Australian businesses and boards. Investment hurdles for public companies are high, probably too high.

However, shareholders are certainly not keen on taking a chance on long-term growth, especially offshore, that may dilute dividends or threaten short term returns on investment. China is certainly not an easy place in which to do business.

Robb's dismay about the results so far in terms of Asian trade and investment is borne out by a range of recent studies examining business attitudes.

A new report by Deloitte Access Economics for Chartered Accountants Australia and New Zealand, for example, found almost two thirds of over 1500 senior members of the business community believe free trade agreements have little or no impact or are uncertain about them.

Lee White, chief executive of CA ANZ, argues that negotiating deals is only half the battle and that fixing this requires much greater education of businesses by the government.

"The survey revealed a real disconnect between the potential benefits of FTAs and the perceived or realised benefits for business," he says.

"This means businesses are either failing to fully understand the benefits of FTA's or the deals are not delivering – either scenario requires urgent action from government."

Of course, calls from business for Government to "do something" to make up for their own failings are all too common in Australia.

But Robb, too, is calling for "leadership" and the need to talk more about opportunities.

"We have to, as a community at every level, start to show some knowledge and self awareness about what's happening," he says.

He's also critical of the lack of growth in trade in services given services contribute more than 70 per cent of GDP but only 17 per cent of exports.

According to Robb, the China agreement allows for hundreds for concessions in the services sector China has not provided to any other country but only four or five of those have been used.

He blames the complacency of a quarter of a century of growth for the "disinterest" about the region among average Australians and narrow, insular thinking in much of business.

"The relationships we have got in the region are appalling," he says. "Trading itself doesn't create understanding and mutual trust and relationships. Australia's investment is minimal. The hostility towards foreign investment here, especially from China, is a misguided indulgence."'

Try persuading much of Australia, including his former colleagues in Canberra, of that.

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