Global geopolitical uncertainty has become the truism of our times. Australia’s intrinsic connection to global trade and investment flows means that the future economic prosperity of the country depends on sustained international engagement.
Australian business must continue to build resilience not only to the known unknowns, but increasingly more agility and speed to address the unknown unknowns as well. In this unpredictable global context, over-exposure to any single market represents significant risk. Diversification is one key way businesses can mitigate geopolitical risk whilst also accessing new opportunities in emerging markets.
Australia is an exporting nation with a continuing need for foreign investment. Australia’s experiences in the global trade and investment sphere since the turn of the century largely point to consistent growth, with isolated disruptions along the way. Since 2000, Australian exports have trebled in value from $145 billion to $438 billion in 2018 , and inward investment from foreign sources has grown by 4.3 percent over the past 5 years to reach $3.8 trillion at the end of 2019 .
The reality is Australian exporters are facing into a very difficult near term future. IMF expects our economy to contract 6.7 percent in 2020 – this worse than the US and EU at 5.9 percent. Foreign investment into Australia is also falling. According to United Nations Conference on Trade and Development (UNCTAD) figures, Australia’s global intake of foreign direct investment in 2019 dropped by 42 percent to USD 39 billion1.
Currently, 55.5 percent of Australian trade is concentrated in 4 key markets – China, Japan, the USA and South Korea, with the former two alone representing 42.2 percent and China itself [33 percent]. However, there are new opportunities in growing regions that complement Australian goods, services and expertise, which offer significant potential to diversify.
The rise around the world of political rather than economic logic in policymaking means that market diversity is essential for Australian businesses to minimise the risk of losing strategic ground.
There are key steps that Australian businesses in global markets should take to help successfully navigate the risks and opportunities of diversification:
- supplement existing markets with identified new opportunities
- access the upside whilst managing the downside
- look to Asia and beyond
- follow a strategic process.
This paper examines in some detail four geographies which Australian businesses are well-placed to explore: India, Indonesia, Vietnam, and the Gulf Cooperation Council (GCC) region.
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