ASIA
18 June 2019
AUSTRALIA AS AN ASIAN INVESTOR
AFG Venture Group's Glen Robinson argues that Australia is lagging behind others for investment and exports to Asia.
It is well demonstrated in many analyses that Australia is well below our contemporaries in relation to our commercial relationships with the global market, and this applies to both investment and exports. Given that our nearest neighbours are in Asia and are among the world leaders in the rate of economic development this position is surprising.
There have been many comments on the reasons for the apparent reluctance of Australians to invest in Asia and this analysis explores some of those reasons
INTRODUCTION
There are many papers which outline and demonstrate that Australian corporates appear reluctant to invest in the Asian region. The reason for this reluctance is the subject of much conjecture, however, over the previous several years a series of impediments have been suggested by business leaders, and this analysis explores those so-called impediments as reasons for inaction.
WHAT ARE THE IMPEDIMENTS?
This is the crux of the off-shore development and in this section the reasons which are often quoted as being impediments to an Asian investment are identified and explored. Those which seem to be regularly quoted are: -
[1] Australia does not have the funds to invest off-shore
[2] corruption is too daunting
[3] The Australian requirement to provide quarterly results
[4] Corporate taxation and lack of franking credits
[5] Regulations and red tape
[6] Too difficult
[7] A lack of a legal framework
[8] reason which is rarely discussed, is the capability of Australian business leaders
These reasons postulated for the reluctance for an off shore investment are explored and evaluated in the following paragraphs
MANAGED FUNDS
Australia is a wealthy country and has a particularly well-developed and active funds management industry. The Austrade publication “Australia’s Managed Funds, 2017 Update” indicates that Australia has in excess of $A3 trillion, which is the 6th largest in the world and the largest in the Asia-Pacific region.
There are several managed funds which target Asia, even so, the comment that Australia being a small country and not having the funds to invest, has no credence.
STOCK MARKETS
The stock markets in Asia are becoming particularly well established and attracting significant interest as well as providing capital for both corporate and national development.
An analysis of the financial performance and outcomes of 6 Asian based stock markets and for comparison 5 western markets including Australia has been undertaken to evaluate the position [1]
In order to provide an analysis covering an extended period, the selected stock exchanges for the period from the end of the Global Financial Crisis taken as 1st January 2009 to the end of financial year June 2017 have been evaluated. Included is the effect of currency valuations. For this Jan 1, 2009 is taken as 100, and the relative index for the individual exchanges at end of June 2017 is shown in the summary.
This analysis demonstrates that on average the selected Asian markets had a higher capital growth than that of the Australian exchange, and the relative low performance of the Australian exchange is noted. The reasons for the relative attractiveness of Asian stock markets are not explored here, but may include: -
-- There are fewer investment alternatives to the stock markets in Asia
-- It is less cumbersome to invest in the Asian stock market
-- The companies are seen as well managed with significant benefits to the investor
There is insufficient information to be specific in relation to reasons for the relatively poor performance of the Australian stock market, however, the question about the managerial strategy and quality should be included in any evaluation of the reason for it.
With the funds available from the Managed Funds and the finance availability through the stock markets it is difficult to see that Australia’s reluctance to invest commercially is due to lack of funds.
Corruption is often touted as an impediment to off shore investment and often rates highly on those scales which purport to identify impediments to off shore investment. The survey conducted by Austcham Asean earlier in 2018, showed that 47% of respondents indicated that corruption was a challenge to operating in Asean [3]
There is no question that corruption is a factor in the region, but is it a real impediment to commercial activities? Probably not. In Australia, the Royal Commission into the financial sector has been conducted and the results have shocked many people as they were not aware of the extent of the corruption in the financial services sector. But business continues.
There are many reports of incidents in which corrupt practises occur but business continues despite this, and in most circumstances, business continues without being directly touched or disadvantaged by it. The Australian example demonstrates this, as does the fact that many companies are operating in the Asean region which is reported to be wildly corrupt, but they do so without being adversely affected.
Overall, it is difficult to see that corruption in the Asian countries is an impediment to clean operations if one so chooses, particularly as there are advisors available to assist
In any event, it is not taken as a legitimate impediment to off-shore investment in the context of this analysis
CORPORATE TAX & FRANKING CREDITS
The individual Corporate Tax structures and the lack of franking credits is occasionally proposed as an impediment to an off shore investment, and there may be legitimate reasons for such considerations. Actually, Australia, New Zealand, Chile, Canada, South Korea, UK, Germany and France have some form of imputation system, and most countries have a Double Tax Agreement [DTA] with their trading partners, all of which tend to reduce the tax liability by avoiding double taxation on dividends etc. In relation to the corporate tax rate, Australian corporates investments have traditionally been targeted to those countries which have the higher tax rates, certainly higher than those in Australia, these are USA [prior to 2018] and NZ
In another study it has been shown that there is NO tax liability for the 36% of the 2000 largest companies in Australia [4], and an investment in another tax jurisdiction may attract a liability, however, however, that hardly seems a reason not to invest.
It is further noted that most of the developing countries in the region offer significant investment incentives, many of which include reasonably long tax holidays as part of the total package. The packages are country specific and are dependent on the product/service being offered, the location of the facility and there may be other factors. Never-the-less it can be a significant assistance in the investment decision and implementation.
The corporate tax liability may be a real reason for reluctance of an off shore investment, but it is difficult to see it as a level one consideration, it is more likely a level ten consideration.
-- The service is basically common across the various countries
-- The capital inputs are similar, i.e. a 5 seater motor vehicle, which are a common cost
-- The major consumables, i.e. fuel, spares and replacement parts, should be a common cost.
-- The taxi service generally is free standing business and is not part of an international ownership in which the operation and fare structure may be imposed from “head office”.
Any variations in those costs are almost certainly attributable to local requirements. The drivers labour cost can be identified and treated separately, and when the driver cost is taken away from the total fare income, the remainder has been termed CODB. The average daily CODB for developed countries shown is approx. $A400 and for the developing countries it is $A100, which implies that the developed countries are at least 4 times the cost of the developing countries in relation to CODB. The cost of labour is a significant cost in the developed economies, but it is less than the CODB.
While the Taxi Analysis may be seen as “approximate” the differences are so significant that minor variations would not change the hypothesis; that the CODB in developing Asia is significantly less than doing business in a developed country. There are several interesting points of information
-- The labour costs in Australia, and other developed countries while they may be significant, they are generally smaller than the CODB
-- Presuming that the principles of this analysis can be translated to other operating or processing business, the CODB would probably be higher as there is usually real estate and buildings with the attendant costs to be considered, which is not a factor in the taxi business
-- It is difficult to see that the CODB in Asia could be an impediment or a significant hindrance to an investment in the region.
The actual ratio of CODB to total cost is dependent on the industry, and it can be presumed that the labour intensive industries are going to have a lower CODB ratio than most other industries.
It is difficult to see that the “red tape” would be an impediment to an investment.
LEGAL FRAMEWORKS
Comments are often made that the Asian countries lacks a legal framework and that is a factor in the reluctance to invest. In fact, there are very few countries which lack a legal framework, but it may well be that the laws appear to be different, apparently stupid, irrelevant and may be ignored by others, but they are there, and as a foreign investor, must be adhered to. If the laws are inconvenient or impede the activities of the proposed investment, then it can be seen as an impediment to an investment and therefore the country should be avoided.
The resultant consideration is that in rare cases can the laws of an Asian country be seen as an impediment to the normal investment activities, however, if the situation does occur, then an investment should be avoided.
-- Into Singapore; 52% by value are from USA, Japan, British Virgin Islands, Cayman Islands, Netherlands
-- Into Malaysia 57% by value are from China, Switzerland, Singapore, Netherlands, Germany
-- Into Indonesia 72% by value are from Singapore, Japan, China, Hong Kong, Netherlands
-- Into Philippines 64% by value are from Netherlands, Australia, USA, Japan
-- Into Thailand 69 % by value are from Japan, Singapore, Taiwan, Switzerland, USA
-- Into China 81% by value are from Hong Kong, Singapore, South Korea, USA
These statistics indicate a reasonably wide spread of investors although the USA and Netherlands do appear to be significant investors in addition to Singapore and Japan
These statistics indicate that FDI or inward investment is a significant part of the economy of the ASEAN countries, so countries other than Australia apparently do not find it too daunting
The publication “Match Fit, Shaping Asia Capable Leaders” by PwC, Institute of Managers & Leaders and Asialink Business [7] has quite a comprehensive and fact based research which supports the need for suitable experience. Other commentators are more forthright, Mike Smith former CEO of ANZ Bank has been reported in the AFR that the short term vision coupled with the compliance driven culture of corporate Australia has spawned accountants and lawyers rather than entrepreneurs onto the company boards [8]
This culture of “short-termism” encourages the board to be looking over the shoulder to the past rather than looking forward and may well be a factor in the reasons that Australian boards are not appealing to Asian entrepreneurs, as also a reason that corporate Australia is a reluctant international investor. Importantly, it may also be a factor in the apparent poor relative performance of the corporates as indicated by share market index discussed in an earlier Section.
It raises the very important question as to what can be done to overcome these apparent short-comings in Australia’s corporate psych
This analysis has not questioned the capability, either general or specifically the Asian capability, but it is a question which should be asked, and evaluated.
-- The first observation is the number of significant public companies which have established an Asian presence and subsequently withdrawn from that particular market. The numbers are quite staggering, and some companies have failed attempts at multiple markets. Obviously it is not appropriate to mention names as the reason for the withdrawal is not known, but it is a significant number and it could be quite illuminating to understand at least some of the reasons.
-- The second observation is the high number of smaller privately owned companies [SME’s] which are quietly working away in the regional markets. They may or may not have an equity connection back to an Australian company. In any event, the entrepreneur within these companies has seen the opportunities and taken the significant, and what could be seen as a very brave step, and established a commercial presence. They have braved the unknown, faced the “difficulties”, entered the market and ostensibly they are thriving.
-- It is very difficult to quantify the number of these SME companies, but informed sources estimate that in Indonesia there are 600, and in Thailand there are 1250. This compares favourably with the number of Australian public companies in these 2 countries, less than 200 in each. Similarly, the large privately owned companies seem to be thriving and expanding in the region.
It would seem that Australian companies can be commercially successful in foreign markets as shown by the SME’s and to a lesser extent, the private companies
SUMMARY
The benefits of an off-shore expansion are quite extensive, however in the national interest the case for off-shore expansion and development of market expertise is compelling. Additionally, the benefits to the individual company can be quite extensive.
Despite this there is ample documentary evidence that corporate Australia is reluctant to enter into off-shore investments, particularly in Asia, despite the overwhelming calls to do so.
There are many issues which have been promoted as impediments, but none by themselves are sufficient reason NOT to invest. None of those “reasons” stand up to critical examination
Probably the most compelling issue is that other countries do not seem to have the same avoidance issues and are investing in the region, and when the FDI statistics for the developing countries are viewed there are some interesting investors. But of real interest is the fact that some of the countries which are avoided by Australian corporates are targeted by others.
In this paper, some of the purported reasons for the investment reluctance are explored and it is difficult to see them as real impediments, and hence, it is important to develop a programme to significantly increase the awareness, benefits and the appropriate actions to increase Australian corporate presence in the region. Australia has the ability to do this, but it will require government leadership and a sound policy together with a definite programme. The private sector will of necessity carry most of the burden, however, a programme of education and action needs to be developed and implemented.
[2] https://www.transparency.org/news/feature/corruption_perceptions_index_2017]
[3] Austcham https://issuu.com/access-asia/docs/australian_business_in_asean_survey_462312876f5b66
[4] http://www.afgventuregroup.com/dispatches/news/corporate-taxation-in-australia-for-the-year-2016/
[5] www.afgventuregroup.com/dispatches/news/comparative-operating-costs-in-asia-2016
[6] https://en.portal.santandertrade.com/establish-overseas/XXXX/foreign-investment
[7] https://asialink.unimelb.edu.au/stories/match-fit-shaping-asia-capable-leaders
[8] https://www.afr.com/leadership/investors-lawyers--accountants-blamed-for-our-failure-in-asia-mike-smith-20170811-gxu4rz
AFG Venture Group
+61 412 229 664
This email address is being protected from spambots. You need JavaScript enabled to view it.
May 2019
About the Author
Glen Robinson’s experience and expertise lie in the manufacturing, processing and distribution areas, with specific emphasis on business management and strategic planning. Glen has more than 30 years’ experience in management consultancy and has worked with a wide range of industries providing advice and assistance to those organisations which wished to establish or enhance a commercial presence in ASEAN. He initially gained his South East Asian experience as chief executive officer for the Asian subsidiaries and joint ventures of a major International manufacturing and marketing organisation. Glen has been on the boards of many Asian related business organisations and has for many years advised a number of Foreign Investment Boards in the ASEAN region. He has a great range of contacts in both business and government in the region
Disclaimer
The information in this paper is for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. No material contained within this report should be construed or relied upon as providing recommendations in relation to any legal or financial product. AFG Venture Group does not recommend or endorse any investments or products and does not receive remuneration based upon investment or other decisions by our email recipients, publications, newsletter or website users.
There have been many comments on the reasons for the apparent reluctance of Australians to invest in Asia and this analysis explores some of those reasons
INTRODUCTION
There are many papers which outline and demonstrate that Australian corporates appear reluctant to invest in the Asian region. The reason for this reluctance is the subject of much conjecture, however, over the previous several years a series of impediments have been suggested by business leaders, and this analysis explores those so-called impediments as reasons for inaction.
WHAT ARE THE IMPEDIMENTS?
This is the crux of the off-shore development and in this section the reasons which are often quoted as being impediments to an Asian investment are identified and explored. Those which seem to be regularly quoted are: -
[1] Australia does not have the funds to invest off-shore
[2] corruption is too daunting
[3] The Australian requirement to provide quarterly results
[4] Corporate taxation and lack of franking credits
[5] Regulations and red tape
[6] Too difficult
[7] A lack of a legal framework
[8] reason which is rarely discussed, is the capability of Australian business leaders
These reasons postulated for the reluctance for an off shore investment are explored and evaluated in the following paragraphs
LIMITED FUNDS
The question of limited funds is explored in the following 2 sub-sectionsMANAGED FUNDS
Australia is a wealthy country and has a particularly well-developed and active funds management industry. The Austrade publication “Australia’s Managed Funds, 2017 Update” indicates that Australia has in excess of $A3 trillion, which is the 6th largest in the world and the largest in the Asia-Pacific region.
There are several managed funds which target Asia, even so, the comment that Australia being a small country and not having the funds to invest, has no credence.
STOCK MARKETS
The stock markets in Asia are becoming particularly well established and attracting significant interest as well as providing capital for both corporate and national development.
An analysis of the financial performance and outcomes of 6 Asian based stock markets and for comparison 5 western markets including Australia has been undertaken to evaluate the position [1]
In order to provide an analysis covering an extended period, the selected stock exchanges for the period from the end of the Global Financial Crisis taken as 1st January 2009 to the end of financial year June 2017 have been evaluated. Included is the effect of currency valuations. For this Jan 1, 2009 is taken as 100, and the relative index for the individual exchanges at end of June 2017 is shown in the summary.
This analysis demonstrates that on average the selected Asian markets had a higher capital growth than that of the Australian exchange, and the relative low performance of the Australian exchange is noted. The reasons for the relative attractiveness of Asian stock markets are not explored here, but may include: -
-- There are fewer investment alternatives to the stock markets in Asia
-- It is less cumbersome to invest in the Asian stock market
-- The companies are seen as well managed with significant benefits to the investor
There is insufficient information to be specific in relation to reasons for the relatively poor performance of the Australian stock market, however, the question about the managerial strategy and quality should be included in any evaluation of the reason for it.
With the funds available from the Managed Funds and the finance availability through the stock markets it is difficult to see that Australia’s reluctance to invest commercially is due to lack of funds.
CORRUPTION
The countries in the Asean region are approximately in the mid region of the Transparency International Corruption Index [2] although there are several which rate exceptionally well.Corruption is often touted as an impediment to off shore investment and often rates highly on those scales which purport to identify impediments to off shore investment. The survey conducted by Austcham Asean earlier in 2018, showed that 47% of respondents indicated that corruption was a challenge to operating in Asean [3]
There is no question that corruption is a factor in the region, but is it a real impediment to commercial activities? Probably not. In Australia, the Royal Commission into the financial sector has been conducted and the results have shocked many people as they were not aware of the extent of the corruption in the financial services sector. But business continues.
There are many reports of incidents in which corrupt practises occur but business continues despite this, and in most circumstances, business continues without being directly touched or disadvantaged by it. The Australian example demonstrates this, as does the fact that many companies are operating in the Asean region which is reported to be wildly corrupt, but they do so without being adversely affected.
Overall, it is difficult to see that corruption in the Asian countries is an impediment to clean operations if one so chooses, particularly as there are advisors available to assist
REQUIREMENT TO PROVIDE QUARTERLY RESULTS
There is a requirement in Australia that publicly listed companies provide updated financial results to the market on a 3 monthly basis. Some commentators see this as an impediment to participating in an off shore investment and unless it is expected to lead to a devaluation of the share price it is difficult to see that there is any impediment.In any event, it is not taken as a legitimate impediment to off-shore investment in the context of this analysis
CORPORATE TAX & FRANKING CREDITS
The individual Corporate Tax structures and the lack of franking credits is occasionally proposed as an impediment to an off shore investment, and there may be legitimate reasons for such considerations. Actually, Australia, New Zealand, Chile, Canada, South Korea, UK, Germany and France have some form of imputation system, and most countries have a Double Tax Agreement [DTA] with their trading partners, all of which tend to reduce the tax liability by avoiding double taxation on dividends etc. In relation to the corporate tax rate, Australian corporates investments have traditionally been targeted to those countries which have the higher tax rates, certainly higher than those in Australia, these are USA [prior to 2018] and NZ
In another study it has been shown that there is NO tax liability for the 36% of the 2000 largest companies in Australia [4], and an investment in another tax jurisdiction may attract a liability, however, however, that hardly seems a reason not to invest.
It is further noted that most of the developing countries in the region offer significant investment incentives, many of which include reasonably long tax holidays as part of the total package. The packages are country specific and are dependent on the product/service being offered, the location of the facility and there may be other factors. Never-the-less it can be a significant assistance in the investment decision and implementation.
The corporate tax liability may be a real reason for reluctance of an off shore investment, but it is difficult to see it as a level one consideration, it is more likely a level ten consideration.
DIFFICULTY AND RED TAPE
In almost every new investment, particularly a cross border one, the apparent red tape and difficulty which is presented may be seen as an impediment to business and it is often touted as such. Another study recently undertaken clearly shows that the major cost factor is what may be termed as Cost of Doing Business [CODB], all those regulatory impositions which add cost to any endeavour. [5]. The taxi service has been deemed the most likely business which can be legitimately used for cross border comparative purposes, for several reasons: --- The service is basically common across the various countries
-- The capital inputs are similar, i.e. a 5 seater motor vehicle, which are a common cost
-- The major consumables, i.e. fuel, spares and replacement parts, should be a common cost.
-- The taxi service generally is free standing business and is not part of an international ownership in which the operation and fare structure may be imposed from “head office”.
Any variations in those costs are almost certainly attributable to local requirements. The drivers labour cost can be identified and treated separately, and when the driver cost is taken away from the total fare income, the remainder has been termed CODB. The average daily CODB for developed countries shown is approx. $A400 and for the developing countries it is $A100, which implies that the developed countries are at least 4 times the cost of the developing countries in relation to CODB. The cost of labour is a significant cost in the developed economies, but it is less than the CODB.
While the Taxi Analysis may be seen as “approximate” the differences are so significant that minor variations would not change the hypothesis; that the CODB in developing Asia is significantly less than doing business in a developed country. There are several interesting points of information
-- The labour costs in Australia, and other developed countries while they may be significant, they are generally smaller than the CODB
-- Presuming that the principles of this analysis can be translated to other operating or processing business, the CODB would probably be higher as there is usually real estate and buildings with the attendant costs to be considered, which is not a factor in the taxi business
-- It is difficult to see that the CODB in Asia could be an impediment or a significant hindrance to an investment in the region.
The actual ratio of CODB to total cost is dependent on the industry, and it can be presumed that the labour intensive industries are going to have a lower CODB ratio than most other industries.
It is difficult to see that the “red tape” would be an impediment to an investment.
LEGAL FRAMEWORKS
Comments are often made that the Asian countries lacks a legal framework and that is a factor in the reluctance to invest. In fact, there are very few countries which lack a legal framework, but it may well be that the laws appear to be different, apparently stupid, irrelevant and may be ignored by others, but they are there, and as a foreign investor, must be adhered to. If the laws are inconvenient or impede the activities of the proposed investment, then it can be seen as an impediment to an investment and therefore the country should be avoided.
The resultant consideration is that in rare cases can the laws of an Asian country be seen as an impediment to the normal investment activities, however, if the situation does occur, then an investment should be avoided.
WHO DOES INVEST IN THE REGION?
The global investment into the Asian region has been increasing rapidly both in revenue terms and the number of investments and investors, and this may be seen as an indicator of the relative ease of business formation, and the relative attractiveness of that economy for foreign investors. The source of FDI into the various countries [6] and the relative level for the year 2016 is: --- Into Singapore; 52% by value are from USA, Japan, British Virgin Islands, Cayman Islands, Netherlands
-- Into Malaysia 57% by value are from China, Switzerland, Singapore, Netherlands, Germany
-- Into Indonesia 72% by value are from Singapore, Japan, China, Hong Kong, Netherlands
-- Into Philippines 64% by value are from Netherlands, Australia, USA, Japan
-- Into Thailand 69 % by value are from Japan, Singapore, Taiwan, Switzerland, USA
-- Into China 81% by value are from Hong Kong, Singapore, South Korea, USA
These statistics indicate a reasonably wide spread of investors although the USA and Netherlands do appear to be significant investors in addition to Singapore and Japan
These statistics indicate that FDI or inward investment is a significant part of the economy of the ASEAN countries, so countries other than Australia apparently do not find it too daunting
LEADERS WITH ASIAN CAPABILITY
One of the perennial questions relates to the suitability of the business leaders for Asian operations and there are several in-depth analyses of the benefits of having Asia literate executives and advisors associated with the companies. A leadership which has a deep understanding of the specific Asian business culture, the good feel for the market requirements, and a long term view of business is necessary for success in the region. There are many examples of the results if any of those characteristics are missing.The publication “Match Fit, Shaping Asia Capable Leaders” by PwC, Institute of Managers & Leaders and Asialink Business [7] has quite a comprehensive and fact based research which supports the need for suitable experience. Other commentators are more forthright, Mike Smith former CEO of ANZ Bank has been reported in the AFR that the short term vision coupled with the compliance driven culture of corporate Australia has spawned accountants and lawyers rather than entrepreneurs onto the company boards [8]
This culture of “short-termism” encourages the board to be looking over the shoulder to the past rather than looking forward and may well be a factor in the reasons that Australian boards are not appealing to Asian entrepreneurs, as also a reason that corporate Australia is a reluctant international investor. Importantly, it may also be a factor in the apparent poor relative performance of the corporates as indicated by share market index discussed in an earlier Section.
It raises the very important question as to what can be done to overcome these apparent short-comings in Australia’s corporate psych
This analysis has not questioned the capability, either general or specifically the Asian capability, but it is a question which should be asked, and evaluated.
OBSERVATIONS AND SUMMARY
The author offers some observations about Australia’s commercial relationship with the region based on over 30 years working with companies which wish to establish or enhance their commercial presence in the region.-- The first observation is the number of significant public companies which have established an Asian presence and subsequently withdrawn from that particular market. The numbers are quite staggering, and some companies have failed attempts at multiple markets. Obviously it is not appropriate to mention names as the reason for the withdrawal is not known, but it is a significant number and it could be quite illuminating to understand at least some of the reasons.
-- The second observation is the high number of smaller privately owned companies [SME’s] which are quietly working away in the regional markets. They may or may not have an equity connection back to an Australian company. In any event, the entrepreneur within these companies has seen the opportunities and taken the significant, and what could be seen as a very brave step, and established a commercial presence. They have braved the unknown, faced the “difficulties”, entered the market and ostensibly they are thriving.
-- It is very difficult to quantify the number of these SME companies, but informed sources estimate that in Indonesia there are 600, and in Thailand there are 1250. This compares favourably with the number of Australian public companies in these 2 countries, less than 200 in each. Similarly, the large privately owned companies seem to be thriving and expanding in the region.
It would seem that Australian companies can be commercially successful in foreign markets as shown by the SME’s and to a lesser extent, the private companies
SUMMARY
The benefits of an off-shore expansion are quite extensive, however in the national interest the case for off-shore expansion and development of market expertise is compelling. Additionally, the benefits to the individual company can be quite extensive.
Despite this there is ample documentary evidence that corporate Australia is reluctant to enter into off-shore investments, particularly in Asia, despite the overwhelming calls to do so.
There are many issues which have been promoted as impediments, but none by themselves are sufficient reason NOT to invest. None of those “reasons” stand up to critical examination
Probably the most compelling issue is that other countries do not seem to have the same avoidance issues and are investing in the region, and when the FDI statistics for the developing countries are viewed there are some interesting investors. But of real interest is the fact that some of the countries which are avoided by Australian corporates are targeted by others.
In this paper, some of the purported reasons for the investment reluctance are explored and it is difficult to see them as real impediments, and hence, it is important to develop a programme to significantly increase the awareness, benefits and the appropriate actions to increase Australian corporate presence in the region. Australia has the ability to do this, but it will require government leadership and a sound policy together with a definite programme. The private sector will of necessity carry most of the burden, however, a programme of education and action needs to be developed and implemented.
REFERENCES
[1] http://www.afgventuregroup.com/dispatches/news/portfolio-investment-in-asia-to-2017-stock-market-to-2017/[2] https://www.transparency.org/news/feature/corruption_perceptions_index_2017]
[3] Austcham https://issuu.com/access-asia/docs/australian_business_in_asean_survey_462312876f5b66
[4] http://www.afgventuregroup.com/dispatches/news/corporate-taxation-in-australia-for-the-year-2016/
[5] www.afgventuregroup.com/dispatches/news/comparative-operating-costs-in-asia-2016
[6] https://en.portal.santandertrade.com/establish-overseas/XXXX/foreign-investment
[7] https://asialink.unimelb.edu.au/stories/match-fit-shaping-asia-capable-leaders
[8] https://www.afr.com/leadership/investors-lawyers--accountants-blamed-for-our-failure-in-asia-mike-smith-20170811-gxu4rz
ACKNOWLEDGEMENTS
Glen RobinsonAFG Venture Group
+61 412 229 664
This email address is being protected from spambots. You need JavaScript enabled to view it.
May 2019
About the Author
Glen Robinson’s experience and expertise lie in the manufacturing, processing and distribution areas, with specific emphasis on business management and strategic planning. Glen has more than 30 years’ experience in management consultancy and has worked with a wide range of industries providing advice and assistance to those organisations which wished to establish or enhance a commercial presence in ASEAN. He initially gained his South East Asian experience as chief executive officer for the Asian subsidiaries and joint ventures of a major International manufacturing and marketing organisation. Glen has been on the boards of many Asian related business organisations and has for many years advised a number of Foreign Investment Boards in the ASEAN region. He has a great range of contacts in both business and government in the region
Disclaimer
The information in this paper is for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered legal practitioner or financial or investment adviser. No material contained within this report should be construed or relied upon as providing recommendations in relation to any legal or financial product. AFG Venture Group does not recommend or endorse any investments or products and does not receive remuneration based upon investment or other decisions by our email recipients, publications, newsletter or website users.