Building Ethnic Business Networks
Speech by the
Minister for Trade
Senator Bob McMullan
at the
"East Meets West Down Under" Evening
Melbourne, 5 July 1995
Introduction
It's a great pleasure to have been asked to join you at East Meets West Down Under this evening.
I was prevented by urgent business, at the last moment, from giving the keynote address to the Sydney meeting last October
- and I've been looking forward to an opportunity to retrieve the situation ever since.
This initiative has had clear success in its first year of life, a success demonstrated by the concentration of dynamic Australian companies that is represented here
- for which Kean Lau and the Australian Chamber of Manufacturers are to be congratulated.
The thrust of what East Meets West Down Under is all about is central to the Government's trade and industry policies
- that is, its focus on networking opportunities for small and medium size businesses interested in our major East Asian markets.
I want to talk about two particular aspects of trade policy today
- to share with you my views on the significance small and medium business has for Australia's trade performance
- and on the opportunities the ethnic business community provide to build linkages with our chief trading partners in East Asia.
SMEs
Let me begin, in good commercial fashion, with a plug for a report by my Department which I recently released called "Winning Enterprises", which looks at the way Australian SMEs are operating in global markets.
The report looks at some of the central questions that are raised for Australian SMEs by the increasing integration - the globalisation - of the world's economy. In particular, it examines
- the pattern and extent of SMEs existing international activities, which it analyses on the basis of some extensive survey ing
- the reasons SMEs enter international markets, the strategies they use and the problems they face
- and the need for continuing efforts to consolidate a dynamic SME sector that can compete and win in global markets.
The starting point for the report is the simple fact that the SME sector is the engine of growth and innovation in the Australian economy.
We have around 756,000 small and 19,000 medium- sized enterprises in the private non-agricultural sector
- they already employ 47 per cent of the workforce - over three million people
- and it is in small and medium firms that prospects for employment creation are best.
These companies are operating against a background of significant changes in the nature of global commerce
- in particular, rapidly increasing international trade and investment flows and greater integration of industrial activities across international borders.
For a long time the globalisation process was driven by the big players, the large transnational companies.
That picture, however, has begun to develop a new dimension, because globalisation offers opportunities for SMEs that are just as favourable as those on offer for big business.
Many of the traditional problems for SMEs in gaining access to international markets have been greatly reduced over the past decade
- improvements in communications and transport have significantly reduced costs and complexity
- and the continuing trends toward the liberalisation and facilitation of international trade and investment have given them access where it was often denied in the past
: even if the liberalisation processes are still far from complete.
And SMEs have often been able to grasp these new opportunities a lot faster than the big players ever could
- because they tend to be less bureaucratic than larger firms, more innovative and so more responsive to emerging trends.
As a result of these developments, Australian SMEs are finding it possible to develop, produce and deliver their goods and services anywhere in the world.
But for every opportunity there is a challenge
- for both large and small businesses, globalisation has meant markets everywhere are increasingly contestable, so that the opportunities opening up for them abroad are matched by the challenges of increasing competition at home and abroad
: for an increasing number of SMEs the bottom line is that concentrating solely on the domestic market is becoming less and less tenable as a strategy.
And SMEs are responding to these challenges and opportunities.
About 4,500 Australian SMEs are now internationally active on a regular basis
- generating about $6.5 billion a year in international turnover, which directly translates into about 40,000 jobs for Australians
- and the prospects for growth above these figures are very promising.
Another 10,000 or so SMEs are involved in export on an irregular basis
- and, of course, many thousands more are directly exposed to trade on the domestic market, competing against imports.
It's vitally important for the national economy that as many of our firms as possible reach their full potential, and compete effectively for markets at home and abroad.
Lifting our trade performance is of course vital to addressing what economists term our "current account constraint"
- last week Australia recorded a CAD of $2.9 billion
: while this excited a lot of comment, some of it bordering on hysteria, the fact that we run a CAD and the fact that this particular monthly figure was the highest on record ought not be, of itself, a cause for panic
: for almost our entire history we have run a CAD
and because investment opportunities in Australia outstrip our own resources we will run one into the foreseeable future.
What I have said and what the Government acknowledges is that over the course of an economic cycle - from the peak of activity to the trough - we ought to be shooting for a CAD in the range of 3 to 3.5 per cent of GDP.
- currently it is averaging around 4.5 per cent
: certainly higher than we would like but over time a level that we can ratchet down in a way that will continue to deliver reasonable economic opportunities for your firms and employment.
There is no single or simple policy solution
- it takes time and it requires co-ordinated policy approaches in four key areas, macro policy, micro reform, industry policy and trade.
With macro- policy, broadly the Budget, we have adopted a medium term strategy to lift the level of national savings so that we can fund more of our investment requirements from our own savings rather than from the savings of foreigners.
Micro reform is about making our economy more efficient
- over the past decade micro-reform has delivered significant dividends
: by international measurements the Australian economy's competitiveness has increased by about 40 per cent.
Through industry policy, we aim to assist our industries and individual firms to meet the challenge of continuing change and to reach their full potential
- at the level of the firm, such assistance is delivered through the AusIndustry network.
The fourth essential arm of policy is in trade
- I have recently completed a thorough review of our trade policy to ensure it is fully relevant to contemporary circumstances
: I will come back to this i my concluding remarks.
Networking and SMEs
The strategies small and medium firms are adopting to take advantage of the new opportunities are not, and cannot be, focused solely on the more traditional approach to exporting.
There's an additional dimension that is particularly important to the success of small business operations in overseas markets
- networking and the formation of strategic alliances with other enterprises to combine complementary assets and to integrate strategies.
This covers a wide range of activities, from the less formal approach of making, maintaining and using personal contacts, both here and overseas, at one end of the spectrum
- to more formal agreements between firms at the other.
Networking and the cooperative behaviour it involves gives firms many competitive advantages, such as pooling risk, sharing expertise and experience of specific markets, combining technology and exploiting market access arrangements
- it's a strategy that is particularly well-suited to the requirements of SMEs, which often lack the resources to make an effective impact in overseas markets on their own.
Australian SMEs wanting to participate in the major markets of East Asia start with a number of real advantages
- because of the reforms that have transformed the Australian economy over the last decade
: changing its old inward-looking, protectionist stance to one that is outward-looking, export-oriented, and competitive
- because that reformist approach is shared by many of the major players in the region, as reflected in the commitment the leaders of the APEC countries made to liberalise regional trade at their meeting in Bogor last November
- and because modern multicultural Australia offers them the means to build strategic networks.
Ethnic business communities and networking
Australia is now one of the world's most culturally diverse societies
- the Australian business community in particular has been enriched with the dynamism and entrepreneurial skills of the societies of our region.
Business always needs to be one step ahead of the international trading game
- and making the best use of these diverse skills to build networks is a way for business, including small business, to be more effective in overseas markets.
Our multicultural workforce does give us considerable competitive advantage in the globally diverse market place
- it provides valuable personal links to and cultural understanding of our major markets
- linguistic skills, cultural knowledge, business contacts and market intelligence offer new ways to increase our business participation, particularly in East Asia.
In the next month or so, I will be releasing a report on Overseas Chinese Business Networks in Asia prepared by my Department's East Asia Analytical Unit.
The study has been a huge undertaking, one of the most comprehensive accounts of ethnic Chinese business in the region yet undertaken
- possibly some of you here tonight have been interviewed or surveyed for it.
The focus of the study on the nature of the international linkages between ethnic Chinese communities, including the Australian Chinese community.
We commissioned it because we know the crucial role many ethnic Chinese business people play in our region's economy
- ethnic Chinese comprise around 6 per cent of the ASEAN countries' combined population but control more than 70 per cent of the corporate wealth.
The more the non-Chinese Australian business community understands about the Australian Chinese business community, the more likely non-Chinese Australian and Australian Chinese firms will be to do business together, both in Australia and overseas .
Ethnic Chinese business networks are not just useful for accessing business opportunities in China
- there are Chinese in Australia with origins from all over the world - Mauritian Chinese, Fijian Chinese and Chinese from India, for example.
Government's support measures
So what role should the Government be playing in all this?
I don't want to exaggerate that role - self-evidently, it's for business to do business
- but I believe the relationship works best when Government focuses on establishing the environment - both domestic and external - which will allow business to grow most effectively.
You can find the overall setting of trade policy in the policy statement entitled Winning Markets - Australia's Future in the Global Economy which the Prime Minister launched a couple of weeks ago.
That statement was all about how we can best create wealth and jobs through trade
- building on the last decade's achievements of greatly expanded export performance
- and looking at the steps we must take over the next five years or so, into the next century, to become in every way a global trading nation.
One of the statement's key points is that the Government will continue to allocate its resources into areas where it can be of greatest assistance to Australian business and which have the potential to produce the greatest returns
- in particular, to small and medium enterprises in the manufacturing and services sectors.
A number of the initiatives announced in the statement have particular relevance for the needs of small and medium business
- a new Austrade client service policy
providing services that are free for new and potential exporters and which are subsidised for firms seeking practical assistance to enter and build export markets
- a new Austrade exporter and market information service called "Tradeblazer" providing SMEs with instant access to relevant export information through the Internet
- an enquiry into export related air freight issues, to examine how services to exporters, particularly of perishable foodstuffs, can be improved
- and a reporting scheme on export barriers, to allow us to record and follow up Australian business concerns about particular problems in overseas markets.
Those initiatives add to a range of existing Government activities that directly support efforts by small and medium business to trade overseas.
Conclusion
I hope I've been able to communicate to you in the time available the Government's recognition of the importance of small and medium business for Australia's economic future
- and the central role that ethnic business networking plays in it, including in such initiatives as this highly imaginative and successful East Meets West venture.