Asean could be Australia's next growth frontier

RECENTLY, Australia brought its largest ever overseas delegation of businesses to Jakarta as part of the Indonesia-Australia Business Week. It is the latest in a series of actions that seek to build closer economic and political linkages between Australia and South-east Asia. Australia was Asean's first dialogue partner in 1974 and this cooperation has strengthened further with the Asean-Australia-New Zealand Free Trade Agreement (AANZFTA) which is Asean's most comprehensive and ambitious trade agreement thus far.

So this begs the question: Are Australian companies taking advantage of this opportunity? The short answer is no, although there are encouraging signs of progress. While there are leading Australian companies such as Linfox, Lend Lease, Woodside, Telstra and Visy that are active in Asean, Australia is still batting well below its economic weight in the region. Australian companies invest almost 60 per cent more in New Zealand than they do in Asean, despite the New Zealand economy being less than one-tenth the size of Asean.

Six trends will shape the future direction of Asean and could provide large potential opportunities for Australian businesses. The first is urbanisation. The McKinsey Global Institute forecasts that more than 90 million people will move to urban areas in Asean by 2030. As the region continues to urbanise and a greater share of the population shifts from farming to manufacturing or service jobs with higher wages, the size of the consuming class could increase by 250 million people in Asean by 2030.